Kerry Pulliam
The Advisor’s Life Insurance Trifecta: Three Post-OBBBA Solutions for HNW Clients

 

By Kerry W. Pulliam, CFP®, AEP®, CEPA®

 

Executive Summary

 

The enactment of the One Big Beautiful Bill Act (OBBBA) represents a seismic shift in the landscape of wealth planning. With a permanent federal estate tax exemption of $15 million per person ($30 million for married couples in 2026, indexed for inflation), the primary focus for most HNW and UHNW clients has pivoted decisively from estate tax mitigation to income tax optimization.

 

To succeed in this new paradigm, advisors need a versatile suite of solutions to address distinct client profiles. The Life Insurance Trifecta provides this — a powerful framework of three specific, high-impact strategies designed to solve the most common and complex tax challenges facing clients today:

  • The Synthetic Mega Roth™ Conversion – For mature clients seeking to neutralize the tax liability of large IRA or qualified plan balances.

  • The Synthetic Mega Roth™ for High Earners – For successful business owners and professionals locked out of traditional Roth accounts by income and contribution limits.

  • The Synthetic Basis Step-Up™ – For clients looking to eliminate the capital gains tax trap for assets held within irrevocable trusts.

Individually, each strategy solves a critical problem. Together, they form a robust toolkit that empowers advisors to deliver immense value in the post-OBBBA world.

 

1. The Synthetic Mega Roth™ Conversion

 

For Older Clients with Large IRA and Qualified Plan Balances

 

The Challenge:

Traditional IRAs and qualified plans remain a significant tax liability in waiting. They are subject to ordinary income tax upon distribution and, following the SECURE Act’s 10-year payout rule, can trigger a compressed tax burden for heirs — transforming a lifetime of tax-deferred accumulation into a tax-accelerated problem.

 

The Solution:

This strategy involves a systematic repositioning of tax-deferred assets. Unlike a traditional bulk Roth conversion that can trigger a massive, immediate tax liability on the entire IRA balance, the Synthetic Mega Roth™ Conversion takes a more tax-managed approach. Clients redirect RMDs or execute smaller, staged Roth conversions to fund a properly structured permanent life insurance policy. This means the client only pays income tax on the smaller, incremental amounts used for premiums each year, avoiding a single, crippling tax event. The policy's death benefit is then received entirely income tax-free under IRC §101(a).

 

The Result:

This approach surgically removes assets from a tax-deferred liability and replaces them with a contractually guaranteed, income-tax-free death benefit — neutralizing the embedded income tax threat and creating a more efficient wealth transfer.

 

Bonus Planning: Charitable Legacy with a Donor Advised Fund

 

For clients with philanthropic goals, the Synthetic Mega Roth™ Conversion can be elevated by naming a Donor Advised Fund (DAF) as the contingent beneficiary of the IRA or 401(k):

  • The IRA passes to the DAF tax-free, eliminating the income tax liability entirely.

  • Life insurance replaces that value for heirs with an income and estate tax-free death benefit.

  • This creates a dual legacy: a tax-free financial inheritance for the family and a lasting charitable endowment for causes the client values.

This enhancement transforms a powerful income tax strategy into a multigenerational impact plan — protecting wealth while amplifying generosity.

 

2. The Synthetic Mega Roth™ for High Earners

 

For Business Owners & High-Income Professionals

 

The Challenge:

High-income professionals are often precluded from contributing to Roth accounts due to IRS income phase-outs and statutory contribution limits, leaving them searching for scalable, tax-efficient accumulation vehicles.

 

The Solution:

Cash value life insurance functions as a powerful Roth alternative:

  • Funded with after-tax dollars.

  • Grows tax-deferred.

  • Provides tax-free access to cash value via policy loans under IRC §72 .

  • No IRS-mandated contribution limits.

The Result:

This strategy creates a scalable, tax-advantaged capital accumulation vehicle that provides a tax-free retirement income stream — empowering high earners to build a private pension they control completely.

 

3. The Synthetic Basis Step-Up™

 

For Appreciated Assets Held in Irrevocable Trusts

 

The Challenge:

Irrevocable trusts present significant income tax hurdles. Non-grantor trusts face highly compressed tax brackets. For grantor trusts, the grantor’s personal capital can be drained by paying the trust’s annual tax bill. For both, assets within the trust do not receive a step-up in basis under IRC §1014 at death.

 

The Solution:

Reallocate a portion of the trust’s assets to a permanent life insurance policy:

  • Insulates capital from the underlying tax issues.

  • Provides an income-tax-free death benefit to the trust.

  • Acts as a synthetic step-up in basis, bypassing the capital gains drag and providing liquidity.

The Result:

Enhances the after-tax value passed to beneficiaries and transforms an inefficient structure into a highly effective wealth transfer tool.

 

A Trifecta of Opportunities: The Right Strategy for the Right Client

 

The power of the Life Insurance Trifecta lies not in stacking these strategies for a single client, but in equipping advisors with the ideal solution for three distinct — and very common — client profiles. You will inevitably encounter each of these scenarios in your practice. The Trifecta ensures you have a specialized, high-impact strategy ready for each one.

 

Implementation Through the FLIGHT Path™

 

Having the right ideas is the first step. Executing them requires a disciplined diagnostic process. The FLIGHT Path™ guides advisors and their clients from diagnosis to implementation:

  • F – Foundation of Knowledge – The process begins with the foundational knowledge an advisor has about their clients. It involves reviewing existing client data and profiles to identify who is a prime candidate for one of the Trifecta strategies.

  • L – Leverage Collaborative Team – Integrate the client’s CPA, attorney, and other advisors.

  • I – Identify Indicators and Implications – Diagnose key financial indicators and explore long-term impacts.

  • G – Guide Client Through Process – Simplify complex concepts and facilitate decision-making.

  • H – Holistic Perspective – Ensure alignment with long-term family and financial objectives.

  • T – Transformational and Tax Efficiency – Shift assets toward structures that maximize tax efficiency and multigenerational wealth.

 

Conclusion: The Advisor’s Mandate in the Post-OBBBA Era

 

The One Big Beautiful Bill Act redefined priorities for wealth advisors. The Life Insurance Trifecta provides the what — a suite of solutions for today’s most pressing income tax challenges. The FLIGHT Path™ provides the how — a proven process for delivering them effectively.

 

For forward-thinking advisors, the mandate is clear: diagnose with precision, deliver with sophistication, and integrate strategies that not only protect wealth but also create lasting legacies.